Eie Guam v. Long Term Credit Bank, Japan

• Decision Date: 27 February 2003
• Docket Number: No. 02-16259.,No. 02-16214.,02-16214.,02-16259.
• Citation: 322 F.3d 635
• Parties: EIE GUAM CORPORATION, a Guam corporation, Plaintiff-Appellant, v. The LONG TERM CREDIT BANK OF JAPAN, LTD., now known as the Shinsei Bank, Ltd., a Japanese corporation; and the Resolution and Collection Corporation, a Japanese corporation, Defendants-Appellees. EIE Guam Corporation, a Guam corporation, Plaintiff-Appellee, v. The Long Term Credit Bank of Japan, Ltd., now known as The Shinsei Bank, Ltd., a Japanese corporation; and the Resolution and Collection Corporation, a Japanese corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

322 F.3d 635

EIE GUAM CORPORATION, a Guam corporation, Plaintiff-Appellant, v. The LONG TERM CREDIT BANK OF JAPAN, LTD., now known as the Shinsei Bank, Ltd., a Japanese corporation; and the Resolution and Collection Corporation, a Japanese corporation, Defendants-Appellees.

EIE Guam Corporation, a Guam corporation, Plaintiff-Appellee, v. The Long Term Credit Bank of Japan, Ltd., now known as The Shinsei Bank, Ltd., a Japanese corporation; and the Resolution and Collection Corporation, a Japanese corporation, Defendants-Appellants.

No. 02-16214.

No. 02-16259.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 13, 2003.

Filed February 27, 2003.

COPYRIGHT MATERIAL OMITTED

Seth M. Hufstedler and Shirley M. Hufstedler, Morrison & Foerster LLP, Los Angeles, CA, for the appellant-cross-appellee.

John E. Porter, Paul, Hastings, Janofsky & Walker LLP, Los Angeles, CA, for the appellees-cross-appellants.

Appeals from the District Court of Guam; Edward Rafeedie, District Judge, Presiding. D.C. No. CV-00-00009-ER.

Before: HUG, ALARCÓN, and GRABER, Circuit Judges.

OPINION

GRABER, Circuit Judge.

We are called on to decide whether a voluntarily joined foreign sovereign may remove a case from a territorial court to a federal district court when the foreign sovereign obtained the original defendant's interest by assignment after the commencement of the litigation. We answer that question "yes" and, accordingly, affirm the district court's exercise of jurisdiction over this case.

FACTUAL AND PROCEDURAL HISTORY

EIE Guam Corporation ("EIEG") is a Guam corporation that is a wholly owned subsidiary of a Japanese corporation, EIE International, Inc. In July of 1992, EIEG obtained a loan of $110.3 million from the Long Term Credit Bank of Japan ("Bank") for the construction of the Hyatt Regency Guam Hotel ("Hotel"). In exchange EIEG executed a construction loan agreement, note, and mortgage on the Hotel. The mortgage allowed the Bank to foreclose on the Hotel if EIEG defaulted on the loan.

EIEG defaulted on the loan in 1993. The loan was extended for one year, but then fell back into default. A Forbearance Agreement was executed by the parties, but collapsed. EIEG has made no payment to the Bank since 1995.

Facing possible foreclosure, EIEG filed suit against the Bank and the other lenders in Guam Superior Court in August 1995. The Bank counterclaimed. The other lenders were dismissed by stipulation. In June 1999, the Guam Superior Court enjoined the Bank from foreclosing on the Hotel.

In August of 1999, the Bank assigned to the Resolution and Collection Corporation ("RCC"), a Japanese corporation, its notes, security instruments, and claims in the litigation with EIEG. In January 2000, the Bank moved to join the RCC as a defendant and counterclaimant under Guam Rule of Civil Procedure 25(c).¹ Two months later, EIEG stipulated to the RCC's voluntary joinder. The court filed a joinder order. The RCC then immediately removed the entire action to federal district court under the provisions of the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. §§ 1601-1611.

Thereafter, the parties engaged in mediation on the island of Maui, Hawaii. At the end of the mediation session, and just six days before the trial in federal district court was scheduled to begin, the parties executed a document they called the "Maui Term Sheet," settling the present litigation and agreeing to dismiss a related action.

In an attempt to iron out their remaining differences, the parties engaged in further negotiations. Those negotiations proved fruitless, however, and the parties reached an impasse. The parties then filed motions in federal district court, asking the court to interpret and enforce the Maui Term Sheet. The court filed an order in July 2001, interpreting and enforcing the Maui Term Sheet. That order held that the Maui Term Sheet constituted an enforceable settlement agreement. Additionally, it interpreted several of the provisions of the agreement whose meaning the parties disputed, and required that the parties conform to those interpretations.

The parties nonetheless failed to agree on the forms of the releases to be executed between them and, therefore, failed to close the deal by the August 9, 2001, deadline provided in the Maui Term Sheet. The Bank and the RCC asked the district court to schedule the case for trial, claiming that this was the remedy called for in the Maui Term Sheet. EIEG countered with a motion to enforce the settlement, maintaining that the court should order specific performance of the agreement. In two orders issued in May of 2002, the district court held that it had the power to enforce the settlement agreement summarily. It interpreted the disputed provisions and ordered the parties "to do everything in their power to implement the settlement." The district court set a new closing date of November 25, 2002. Instead of working to close the deal by that date, the parties brought these timely appeals of the district court's two May 2002 orders.²

STANDARDS OF REVIEW

The existence of subject matter jurisdiction under the FSIA is a question of law that we review de novo. Park v. Shin, 313 F.3d 1138, 1141 (9th Cir.2002). We review a district court's findings of fact for clear error. Freeman v. Allstate Life Ins. Co., 253 F.3d 533, 536 (9th Cir.2001).

DISCUSSION

EIEG presents four arguments to support its assertion that removal of the case to federal court was improper. EIEG argues that: (A) the RCC is not a "foreign state" within the meaning of the FSIA; (B) the action is not "against" the Bank and the RCC, so the FSIA's removal provision does not apply; (C) the RCC could not remove because it is an assignee that took the assignment after the litigation was underway, and then voluntarily joined the litigation; and (D) the RCC submitted itself to the jurisdiction of the Guam Superior Court. We will address each of those arguments in turn.

A. The RCC Is a Foreign State Under the FSIA.

The Foreign Sovereign Immunities Act provides the exclusive source of subject matter jurisdiction over suits involving foreign states and their instrumentalities. Gates v. Victor Fine Foods, 54 F.3d 1457, 1459 (9th Cir.1995); Joseph v. Office of Consulate Gen. of Nig., 830 F.2d 1018, 1021 (9th Cir.1987). The FSIA grants federal courts subject matter jurisdiction over actions brought against "an agency or instrumentality of a foreign state." 28 U.S.C. § 1603(a). "An `agency or instrumentality of a foreign state' means any entity"

(1) which is a separate legal person, corporate or otherwise, and

(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and

(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (d) of this title, nor created under the laws of any third country.

28 U.S.C. § 1603(b).

The parties, and we, agree that the RCC satisfies the requirements of § 1603(b)(1) and (b)(3). The only point of dispute is whether the RCC satisfies one of the alternative conditions of § 1603(b)(2). "[T]here are two ways in which an entity can fulfill the requirements of § 1603(b)(2). Either the entity can be an `organ of a foreign state,' or the entity can have a majority of its shares or other ownership interest owned by `a foreign state or a political subdivision thereof.'" Corporacion Mexicana de Servicios Maritimos, S.A. de C.V. v. M/T Respect, 89 F.3d 650, 654 (9th Cir.1996) (quoting Gates, 54 F.3d at 1461). In this case, the first condition is met, so we need not consider the second.³

We have observed that "[the FSIA]'s legislative history suggests that Congress intended the terms `organ' and `agency or instrumentality' to be read broadly." Gates 54 F.3d at 1460. For example, the House Report stated that

entities which meet the definition of an "agency or instrumentality of a foreign state" could assume a variety of forms, including a state trading corporation, a mining enterprise, a transport organization such as a shipping line or airline, a steel company, a central bank, an export association, a governmental procurement agency or a department or ministry which acts and is suable in its own name.

H.R. Rep. No. 94-1487, at 15-16 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6614. We have also explained:

In defining whether an entity is an organ, courts consider whether the entity engages in a public activity on behalf of the foreign government. In making this determination, courts examine the circumstances surrounding the entity's creation, the purpose of its activities, its independence from the government, the level of government financial support, its employment policies, and its obligations and privileges under state law.

Patrickson v. Dole Food Co., 251 F.3d 795, 807 (9th Cir.2001), cert. granted in part, 536 U.S. 956, 122 S.Ct. 2657, 153 L.Ed.2d 834 (2002) (citing Corporacion Mexicana, 89 F.3d at 654-55; Gates, 54 F.3d at 1461). An entity may be an organ of a foreign state even if it has some autonomy from the foreign government. Patrickson 251 F.3d at 808; see also Gates 54 F.3d at 1461 (stating that because "the [state] is not directly involved in the day-to-day activities of [the entity] does not mean that it is not exercising control over the entity").

The Japanese government created the RCC expressly to perform a public function. The district court found that the RCC was created pursuant to several laws enacted by the Japanese Diet, namely Article 3.1 of Tokeutei Jutaku Kinyu Senmon Kaisha no Saiken Saimu no Shori no Sokushin tou ni kansuru Tokubetsu Sochi Hou, and supplementary provisions of Yokin Hoken Hou. The district court stated that "[t]he Japanese government created the RCC to carry out Japanese national policy related to revitalization of the Japanese financial system." Additionally, ...